Tuesday, January 25, 2011

As one who had lived and worked for seven years in Europe including three years in Switzerland, may I place some of my thoughts before you in relation to the present debate on action against Indian nationals parking illegally-earned money in foreign bank accounts?

2.I was prompted to write this letter after watching on NDTV on January 25 a discussion on this subject between Shri Bajaj and Barkha Dutt. Shri Bajaj made a very important point. He said instead of merely blaming foreign Governments for inadequate co-operation in this field, the first effective action has to be taken in India against "tax chors" who park their money abroad.

3.This effective action has to be in the form of identifying Indian nationals who park their money abroad, getting details of their foreign bank accounts through human sources working in their offices in India and confronting foreign governments with details collected by us in India and seeking their mutual legal assistance. If we do so, they would find it difficult to evade our requests for co-operation. Presently, they are able to evade our requests for co-operation because our requests are general and not specific mentioning the wrong-doers identified by our economic and financial intelligence agencies and details of their overseas accounts as collected in India by them.

4.After my retirement in 1994,, I had written an article pointing out the need for revamping our economic and financial intelligence set-up. It was published by the "Business Line" of the "Hindu" group. After reading that article, Shri M.R.Sivaraman, the then Revenue Secretary working under Shri P.Chidambaram, the then Finance Minister before the change of Government in 1998, wrote to me that the Government would be implementing some of my suggestions.One of the actions reportedly taken by Shri Chidambaram was to set up a revamped Economic Intelligence Council (EIC) chaired by him to monitor the collection, analysis and assessment of economic and financial intelligence and follow-up action thereon. The first meeting of the revamped EIC was held on July 22,1997. It met once a week thereafter providing some vigour to domestic investigations in India against wrong-doers.

5.In July 2000, the Government of Shri Atal Behari Vajpayee had set up a Special Task Force to make recommendations for the revamping of our intelligence set-up in the light of the inadequacies noticed during the Kargil conflict of 1999. It was headed by Shri G.C.Saxena, the former head of the R&AW. Among its members were Shri M.K.Narayanan, former National Security Adviser, Shri K.Raghunath, former Foreign Secretary. Shri P.P.Shrivastav, former Special Secretary, Ministry of Home Affairs, and myself.

6. It came to the notice of the Task Force that since Shri Chidambaram and Shri Sivaraman left office , there was a serious dilution by their successors of the attention paid to the working of our economic and financial intelligence set-up. The EIC had not even met regularly after they left office. The Task Force, in its report, drew attention to the functioning of our economic and financial intelligence set-up and made certain recommendations for corrective action.

7. In my book titled "Intelligence---Past,Present & Future" written in 2001 and published by the Lancer Publications of Delhi, I had written, inter alia, as follows in the Chapter on "Financial & Narcotics Intelligence":

"In India, the collection of financial intelligence and the use of such intelligence to deal with organised crime groups is essentially handlled by the Central Bureau of Investigation (CBI), the Directorate of Revenue Intelligence (DRI), the Enforcement Directorate and the Central Narcotics Control Bureau. There was no mechanism for a co-ordinated assessment of their intelligence, identification of gaps in their coverage and initiation of steps to fill such gaps.

" This lacuna was to be filled through the setting-up of a re-constituted Economic Intelligence Council chaired by the Finance Minister. During its first meeting on July 22,1997, it was reported to have set up a core group to monitor trends in financial crime and keep the Council informed.

" The fight against money-laundering in India is complicated by the following factors:

* The politician-criminal nexus. * The lack of effective control over contributions to political parties and election expenses.

" This enables criminal elements to use their contributions to the political process as a safe-channel for money-laundering and for gaining political influence to incapacitate the intelligence and investigating agencies so that they cannot effectively act against them.

" While the search for an entente cordiale between the States of India and Pakistan has proved elusive since 1947, there is an entente cordiale between the criminal worlds of the two countries, interacting with each other either directly or through the intermediary of their counterparts in Dubai. No study in depth has been made of this entente cordiale or, if it has been, the public has not been told of its conclusions.

" There is thus a lack of the required political will to deal with this problem in an effective manner by strengthening the capabilities of the intelligence and investigating agencies and letting them function without any political interference. There has also been a lack of interest on the part of our legislators in this subject, which has a vital bearing on our national security, economic well-being and fight against terrorism and Pakistan's proxy war. Since the NSC (National Security Council) Secretariat is designed to function as the nerve centre overseeing all aspects relating to our national security, it should have an oversight role in respect of the collection, assessmernt and utilisation of financial intelligence and evaluation of the performance of the agencies responsible for these tasks too." Citation from my book ends.

8. I understand that the Group of Ministers set up by the Vajpayee Government examined the report of the G.C.Saxena Task Force and accepted some of its recommendations for implementation. I do not have an idea of the follow-up action taken. Has there been a streamlining of our financial intelligence set-up? How satisfactory is their functioning? How many Indians having foreign bank accounts have they identified? How many of them were prosecuted? If they were not prosecuted, why not? These are important questions, which need looking into.

9. There are two aspects to action against Indian nationals parking illegally-acquired money in foreign bank accounts.The first aspect is our own action in India and the second is successfully seeking foreign co-operation. Our attention has been mainly on the second aspect of co-operation by foreign countries. The first aspect of our own sins of commission and omission has not received the attention it merited. The nation owes a debt of gratitude to Shri Bajaj for drawing attention to this during his TV discussions with Barkha Dutt at Davos.

10. This matter needs your personal attention and that of Sri Pranab Mukherjee, the Finance Minister.